David Beatty and Rick Powers discuss the importance of boards dealing with new technology or risk being left behind.
Rick Powers: David, you talk about the digital tsunami. Can you tell us a little about that?
David Beatty: Well, you know the Canary Islands, Rick. I think you were there just a couple of weeks ago, weren’t you?
David Beatty: The one that’s on the northern, western most part, it’s called La Palma, and it’s projected to fall into the Atlantic Ocean, break in two, 300 cubic miles of material, creating a giant tsunami that’s going to come across the Atlantic at 500 miles an hour, hit New York City with waves 75 to 125 feet high. And nobody will believe it’s coming, and so they estimate 50 to 75 million people on the East Coast of the U.S. will die. How about that?
Rick Powers: Tragic story, but what does that have to do with governance?
David Beatty: Well, the digital tsunami is already upon us. Big data, artificial intelligence-
Rick Powers: I see.
David Beatty: All of that material, it’s on us now, and you can’t just hold your breath and hope it’s going to go away. This stuff is transforming industry after industry. Everybody will remember Uber. If you’ve been on aboard a Beck taxi, and hadn’t paid attention, all of a sudden you wake up and this thing called Uber in your business, and if you’re not responding in some way, shape, or form, to potential threats to your business, you are going to be out of business.
Rick Powers: How does a board prepare for something like this?
David Beatty: I don’t know, but they sure as heck got to be aware that it’s coming. It’s on them, now.
David Beatty: Some boards have actually introduced into their membership younger people. Now, the average board age, I’m going to say it’s a 62. Walmart has four directors under 40, because it was so concerned about Amazon, that it figured, “Man, we got to get this talent right around the board table now,” so they have four directors who are 40 or under.
Rick Powers: Well, we take a look at skill sets on boards, and what you’re saying is in addition to the financial acumen, the HR, all these skill sets, we need somebody that understands this new type of business, and it’s probably going to be somebody younger.
David Beatty: No question. I mean, you do have a computer, don’t you?
Rick Powers: I do.
David Beatty: Yeah, well that’s good. That’s about the extent, though, of your digital knowledge and awareness, and that would be typical, I think, of anybody over 50. You just are not part of that business industry. So, you need to be looking at younger directors if you’re going to put this at the board level.
Rick Powers: Is this sector specific, or industry specific, or is it everywhere?
David Beatty: I think it’s pretty much everywhere.
David Beatty: I was at a conference in Chicago a month ago with 45 CEOs of industrial companies, people who make stuff; valves, light switches, lights, that kind of thing. And the whole purpose the seminar, there was 45 CEOs of publicly traded companies, was to get them into this idea that digitization is transformative for every business. It’s really huge. And companies like Komatsu and Caterpillar, who make heavy equipment for mines, for example, they’re investing two to five billion a year trying to understand how this stuff is going to work and transform their businesses, because they deeply believe that there’s a huge first mover advantage. The guys and gals who get in front of this movement as a company are going to revolutionize the space they’re operating in, and they’re going to have a lead that’s going to be very difficult for anybody to catch up to. So, gold or gone, again.
Rick Powers: So whether it’s strategy, other topics like that, this is something that the board has to have near the top of their agenda, and deal with it every meeting.
David Beatty: Yeah, the tsunami will kill 50 million Americans because they don’t believe it’s coming. Any board that doesn’t believe the digital tsunami is on them today is likely to go into remission, and a quick and unhappy death, would be my view.
Rick Powers: Well, very good points. Thanks, David, very much.
David Beatty: Okay.